Brown v. M'Gran

IN error to the Circuit Court of the United States, for the District of Georgia.

In the Inferior Court of Richmond county, in the state of Georgia, Thomas M'Gran, the defendant, instituted a suit by attachment against the plaintiffs in error, to recover damages for the sale of two hundred bales of cotton, shipped by him to the plaintiffs in error, as his factors; the cotton having been sold for a less price than the same would have produced had the sales been made according to the instructions of the shipper.

The declaration contained three counts, all upon the shipment of the two hundred bales of cotton, by Thomas M'Gran to William and James Brown and Company, at Liverpool, as the factors of the shipper.

The first count alleges, that while the cotton remained in the hands of the consignees, the shipper ordered him to hold the cotton until they should hear from him again; but the same was sold in violation of the order, and to the damage of the shipper.

The second count charges the consignees with not having exercised reasonable diligence in keeping and selling the cotton; but that they dealt with the same so negligently and carelessly, so that it was sold at a loss to the shipper.

The third count alleges, that the consignees did not sell the cotton to the best interests of the shipper, nor did they obey his instructions; but on the contrary, managed the same carelessly and negligently, and sold the same contrary to orders, with a reasonable prospect of rise of the article, for three thousand dollars less than the value of the cotton, at the time the same was sold.

The case was removed, under the provisions of the Judiciary Act of 1789, to the Circuit Court of the United States, for the District of Georgia; the defendants below not being citizens of the state of Georgia, and not residing in that state.

The defendants pleaded the general issue, and the cause having been tried in the Circuit Court, the jury gave a verdict for the plaintiff, Thomas M'Gran, under the directions of the Court, for four thousand nine hundred and seventy-five dollars and fifty-seven cents. The defendants excepted to the ruling of the Circuit Court; on questions submitted during the trial of this cause, and they prosecuted this writ of error.

On the trial it was given in evidence, that two hundred bales of cotton were shipped by defendant in error, from Mobile, to the plaintiffs in error, at Liverpool, as his factors, to be sold by them under a del credere commission. That this cotton was received by them about the 9th of April, 1833, and cost, per invoice, nine thousand one hundred and fifty-one dollars and seventy-seven cents. That the plaintiffs in error, through Brown, Brothers, and Company, their house in New York, accepted, early in March, 1833, a draft of defendant in error, for nine thousand dollars, drawn against said cotton, upon their said house in New York; that when this draft arrived at maturity, the said house in New York paid the same, and in order to reimburse themselves, and in pursuance of an arrangement between plaintiffs in error and defendant in error, drew upon the plaintiffs in error, at Liverpool at sixty days' sight, for one thousand eight hundred and seventy-one pounds and nine pence sterling. This draft was dated May 7th, 1833, was accepted by plaintiffs in error, at Liverpool, June 3d, 1833, and fell due and was paid by them on the 5th of August following. That by the contract between the plaintiffs in error, and the defendant in error, the cotton in question became pledged by the defendant in error to the plaintiffs in error, to enable them to meet their acceptances and repay their advance thereon.

After shipping the cotton and drawing against it as aforesaid, the defendant in error became insolvent.

On June 3d, 1833, plaintiffs in error sold said two hundred bales of cotton for two thousand and seventy-three pounds four shillings and sixpence, cash, September 16th, 1833; being a profit of about ten per cent. On the same day on which they sold this cotton, they sold six hundred and seventy-seven bales, in which their Baltimore house was interested; and, in a week previous, had sold two hundred and sixteen bales, in which their Baltimore house was also interested.

At the time of the sale of the two hundred bales of cotton, the defendant in error was indebted to plaintiffs in error in a large sum.

During the week in which the two hundred bales were sold, the sales of cotton amounted to forty-seven thousand two hundred and fifty bales: a larger amount than in any previous week for about eight years.

On April 20th, 1833, the defendant in error wrote to plaintiffs in error: 'If you have any cottons on hand when this reaches you, in which I am interested, I wish you to hold them until you hear from me again.'

This letter was received by William and James Brown and Company, on the 23d of May, 1833; and on the day following, the 24th of May, 1833, they wrote to Thomas M'Gran: 'We are in possession of your esteemed favour of the 20th ultimo, and your wishes in respect to the cotton we now hold on your account, are noted accordingly.'

On June 9th, following, the plaintiffs in error wrote to defendant, annexing a circular, showing the extensive business done in cotton during the week, and a material improvement in prices; and informed him that, believing this advance would probably equal the expectations he had formed when he last wrote, and thinking it desirable to close his cotton in their hands, as they had then been drawn upon for the advance on it, they had taken advantage of this brisk demand to dispose of the two hundred bales at an advance of one-half to five-eights of a penny per pound upon its value when first landed.

On July 30th, 1833, the defendant in error replied to the last letter, referring to his previous letter of April 20th, and asked of plaintiffs in error, 'why did you sacrifice my cottons as the draft drawn by Brown, Brothers, and Company, at sixty days, on account of these cottons, could not have been accepted more than a day or two before? Therefore, you had sixty days before you had any money to pay for me.' He adds: 'I do not recognise the sale; and do not consider you authorized to sell the cotton before the time the draft drawn on you by Brown, Brothers, and Company, against this cotton, falls due. If the price is higher on that day than the day you sold it, I will expect you to allow me the difference; and if it is lower, I will be prepared to pay you any balance I may owe you.'

On September 4th, 1833, the plaintiffs in error replied, that there had been a balance due to them from defendant; that the two hundred bales were sold at an advance, and barely squared the accounts. That defendant had been obliged to stop payment, that any loss would be certain to fall on them, and profit not likely to go to him, but to his creditors. That the cotton was not sacrificed, but sold at a profit, such as is not frequently realized on that article; that they sold some on account of their Baltimore house, and some immediately before, and immediately after, in which their said Baltimore house was interested. That near fifty thousand bales changed hands in the same week. That, situated as the defendant in error then was, he could not reasonably have expected them to hold the cotton, without pointing out in what manner they should be indemnified in event of loss thereby. That the fact that Brown, Brothers, and Company's draft was not due did not alter the case, as they had become responsible some months before, by Brown, Brothers, and Company's acceptance of the draft of the shippers.

On July 22d, 1833, the defendant in error wrote to plaintiffs, that he had received their favour of the 24th of May, and noted the contents. That they would please to sell the two hundred bales soon after the receipt of the letter, unless they were of opinion they could do better by holding a little longer. This letter was reseived by the plaintiffs in error, August 23d, 1833.

The counsel for the defendant below, prayed the Court to instruct the jury, that the matters given in evidence on the part of the defendants were sufficient, and ought to be admitted to bar the plaintiff's action; which instruction the Court refused to give.

And the Court further refused to instruct the jury:

1. That the advance by the house of Browns, in New York, was in effect an advance by the house in Liverpool; and after the advance so made, the shipper had no right to alter the instructions which were given at the time of such advance.

2. That the house in Liverpool having advanced so large an amount on this cotton, having a large previous unsettled claim against the shipper, and the said shipper having afterwards, and before the sale of the cotton, become insolvent; the house in Liverpool had a right to sell for their reimbursement, notwithstanding the subsequent orders of the shipper.

And the Court instructed the jury that it was their exclusive province to decide from the evidence in the cause, whether the defendants had advanced any money to the plaintiff on the cotton shipped by the Mary and Harriet. Whether, when the defendants sold said cotton, the plaintiff was indebted to them upon a previous unsettled claim, and whether the plaintiff had become insolvent before the sale of said cotton; and also further instructed the jury, that if they found from the evidence in the cause, that the plaintiff had given instructions to the defendants by his letter of the 20th of April, 1833, not to sell any cottons which the defendants might have on hand when that letter reached them, in which the plaintiff was interested, until the defendants heard from him again, and that such instructions were received and recognised by the defendants, by the evidence in the cause, and particularly by a letter given in evidence as one from the defendants to the plaintiff, dated the 24th of May, 1833, in reply to the plaintiff's letter to them of the 20th of April, 1833; that then the defendants were not justifiable in law in the sale of the 3d of June, 1833, on account of the defendants having on that day accepted Brown, Brothers, and Company's draft for one thousand eight hundred and seventy-one pounds and nine-pence, dated 7th of May, 1833, at sixty days' sight.

And the Court further instructed the jury, that if they found from the evidence in the cause, that cottons were selling for a higher price from the 3d June, 1833, when the draft was accepted, and when the cotton was sold, until the time when the said draft was mature and payable, and if the evidence in the cause ascertains at any time before the maturity of the draft, what such higher price was, and that the cotton belonging to the plaintiff could have been sold for such higher price; that then the plaintiff was entitled to recover from the defendants the difference in price between the sum for which the defendants sold the plaintiff's cotton, and the sum at which it might have been sold before or at the maturity of the draft.

The defendants in the Circuit Court, excepted to these instructions.

The case was argued by Mr. G. W. Brown, for the plaintiffs in error; and by Mr. Jones, for the defendant.

Mr. Brown contended,

1. That although an agent is generally bound to conform to the instructions of his principal, the circumstances of this case were such as to give the plaintiffs in error a right to sell the cotton in question, notwithstanding the letter of the defendant in error, of April 20th, 1833.

The cotton was shipped by M'Gran to the Browns, as his factors; and this circumstance alone was equivalent to an authority to sell. The definition of a factor is, 'an agent who is commissioned by a merchant or other person to sell goods for him, and to receive the proceeds.' Selw. N. P. 827. If at the time when the consignment was made, the consignor had given instructions as to the manner or time of sale, the consignees would have been bound to comply with them. But no such instructions were given. This was a general consignment; and the evidence discloses the fact that, upon the faith of this consignment, the Browns accepted bills to the amount of nearly the full value of the cotton. The invoice cost of the cotton was nine thousand one hundred and fifty one dollars and seventy-seven cents; the bill drawn against it amounted to nine thousand dollars. The evidence further shows-and all the evidence in the case was offered by the defendant in error that this bill was accepted by the plaintiffs in error, through their house in New York of Brown, Brothers, and Company. When this bill arrived at maturity, it was paid by the house in New York, who, in order to reimburse themselves, drew a bill upon the plaintiffs in error, dated May 7th, 1833, at sixty days' sight, for one thousand eight hundred and seventy-one pounds and nine pence, which was accepted by them, June 3d, 1833, and fell due and was paid on the 5th of August following. This arrangement was in conformity with the contract made by the parties, was in accordance with the regular course of trade, and was highly advantageous to the shipper. The cotton arrived at Liverpool, April 9th, 1833, and was not sold until June 3d-a period of fifty-five days. At the time of the sale, M'Gran was indebted to the plaintiffs in error in a considerable balance, and had become insolvent.

Under these circumstances, it is contended, that the plaintiffs in error acquired a special property in the cotton, with a power of sale, in order to reimburse themselves for the advance made through their house in New York, and to put themselves in funds to meet their acceptance of the bill drawn by said house against the shipment. 2 Kent's Com. 640. 642. Story on Bailments, 204, 205. 218. Story on Agency, 382. Parker vs. Brancher, 2 Law Rep. 46. 3 Chitty on Com. and Manufac. 551. Pothonier vs. Dawson, 3 E. C. L. R. 135. Zoit vs. Millauden, 16 Martin's Rep. 470.

The contract of the consignees with the consignor, in effect amounted to this: 'We will consent to accept to such an amount upon your consignment, provided we have the right of selling, in order to put ourselves in funds to meet our acceptance.' That such a right to sell existed, seems to be admitted by M'Gran throughout the correspondence; notwithstanding his complaints as to the time when the sale was made.

Upon the principles of commercial law, M'Gran, having drawn upon the Messrs. Brown without having funds in their hands, was bound to put them in funds to meet the bill so drawn. Bainbridge & Co. vs. Wilcocks, 1 Baldw. Rep. 538.

There is a strong analogy between the case of a consignment of goods to secure an acceptance or advances, and the case of a mortgage with a power to sell annexed. Drinkwater vs. Goodwin, 1 Cowp. 256. In both cases there is a power to sell, coupled with an interest or estate in the thing pledged. Rice vs. Austin, 17 Mass. Rep. 200. Hunt vs. Rousmanierie's Exec. 8 Wheat. 203. This power was irrevocable; it could not be affected by the express revocation of M'Gran, or by the death or bankruptcy of the consignor or consignees. Story on Agency, 387. 504. 1 Bell's Com. § 413, 4th edit. And, a fortiori, it could not be revoked by the mere expression of M'Gran's wishes, contained in his letter of April 20th. M'Gran does not 'order' nor 'direct;' he does not even 'request;' but makes use of the mildest word that can express the idea of desire; he simply 'wishes.' But it will be contended, that M'Gran's wishes became binding upon the plaintiffs in error, upon their supposed assent contained in their reply of May 24th, 1833. They there say that they had received the letter of defendant in error, and that his wishes in respect to the cotton they then held on his account were 'noted accordingly.' The expression means nothing more than that they observed the wishes of their correspondent, as contained in his letter; they do not promise to comply with them in all events; they reserve to themselves the privilege of giving effect to them or not, as might be consistent with the protection of their own interests and legal rights. The expression 'to note' never properly means to assent; and no usage can be found to justify our attaching to it such a signification in this case. Crabbe's Syn. Webster's Dict.

There are many much stronger cases in the law, where similar expressions have been decided not to be equivalent to an assent. Perring and others vs. Hone, 13 E. C. L. R. 328, Opinion of Best, J. Rees vs. Warwick, 2 Barn. and Ald. 133; observed upon by Parke, J. in Fairlie vs. Herring, 13 E. C. L. R. 78. Powell vs. Jones, 1 Esp. C. 17. 2 Pardessus Cours de Droit Commercial, 171.

But if, in mercantile language, the expression conveys the idea of assent, there should be some evidence offered of that fact. The learned judge before whom the case was tried, erred in leaving it to the jury to say, 1st. Whether defendant in error, by his letter of April 20th, instructed the plaintiffs in error; and 2d. Whether the plaintiffs in error recognised these instructions; when no evidence whatever was laid before the jury to enlighten them as to the meaning of the expressions used. Story on Agency, 63. 72, n. 1. Ekins vs. Maclish, Ambler, 184, 185. Mechanics' Bank vs. Bank of Columbia, 5 Wheat. 326. Lucas vs. Groning, 2 E. C. L. R. 61. Macbeath vs. Haldimand, 1 Term Rep. 172.

M'Gran, in his letter of July 30th, in which he complains of the sale of the cotton, really admits the right of the Browns to sell, in order to meet the bill drawn on them. He says, 'I do not recognise the sale, and do not consider you authorized to sell the cotton before the draft drawn on you by Brown, Brothers, and Company, against this cotton, falls due. If the price is higher on that day than the day you sold it, I will expect you to allow me the difference; and if it is lower, I will be prepared to pay you any balance I may owe you.'

Now this abandons the whole ground. M'Gran, by his letter of April 20th, had instructed, as it is contended on the other side, the plaintiffs in error not to sell until they heard from him again. They did not hear from him again until August 23d, when his next letter, dated July 22d, and ordering them to sell, was received. Now the plaintiffs in error were bound by the instructions of M'Gran, or they were not. If they were bound, they had no right to sell until August 23d, when his orders to sell were received. If they were not bound, as M'Gran admits-for he concedes that they had a right to sell at the date of the maturity of the draft, August 5th-then they were to use their own discretion, as skilful and honest factors, as to the time of sale. M'Gran admits they had a right to sell in order to meet the bill, notwithstanding his instructions; but limits them to a single day that of the maturity of the draft. This position is absurd. On that day it might have happened that no purchasers could be found, or that the cotton had fallen so low that the whole would not produce enough to meet the bill.

Again, if M'Gran had the right to instruct his factors to hold his cotton for four months, he would have had the same right to instruct them to hold it for four years. He might have done so with little inconvenience to himself; for he had received as an advance nearly the whole invoice cost.

This argument derives much additional force, from the fact that M'Gran, at the time when the order not to sell was given, had become insolvent, and was in debt to plaintiffs in error.

The policy of the law will induce the Court to uphold the sale. The Messrs. Brown acted in good faith, and no doubt, with prudence, although the result proved unsatisfactory. They did all that could be expected, for they acted for M'Gran precisely as they did for themselves. On the same day they sold six hundred and seventy-seven bales, on account of nine different parties, in part of which their Baltimore house was interested; and, within a week previously, two hundred and fifteen bales, in which the Baltimore house was also concerned. A larger business was done at Liverpool in cotton during the week in which the sale was made, than had been done in any one week for the preceding eight years. The cotton was held upwards of fifty days, and sold at a profit of nearly ten per cent. more, according to the testimony, than is generally realized in that article. Where no fraud is chargeable on an agent, his conduct ought to receive a liberal and favourable construction. Drummond et al. vs. Wood, 2 Caines, 310.

But if the plaintiffs in error did recognise the instructions of the defendant in error, it was merely an admission as to the legal effect of a contract, and cannot conclude them. 2 Phil. on Ev. 4th edit., and cases there cited.

But conceding, for the sake of argument, that the correspondence in the case amounts to an agreement on the part of the plaintiffs in error, that they would hold the cotton until instructed by M'Gran to sell; it is contended that such an agreement would not be binding, because it was made without consideration.

A valuable consideration had already passed between the parties. M'Gran had shipped cotton to plaintiffs in error, who, upon the faith of the shipment, had come under an advance and acceptance to a large amount; the contract was then concluded, and binding upon both parties, and no new agreement could be engrafted upon it without a new consideration. To make a contract binding, the consideration must be either a benefit to the party promising, or some trouble or prejudice to the party to whom the promise is made; but here there was merely a gratuitous undertaking on the part of the plaintiffs in error to comply with the wishes of the defendant in error. Suppose that M'Gran, in his letter of the 20th of April, had written to the Messrs. Brown that he had become dissatisfied with their conduct as his factors, and requested them, upon the receipt of his letter, to deliver the cotton to some other agent named by him, and that the Messrs. Brown had replied, that they had received his letter, and noted his wishes accordingly. Could it be for a moment contended that upon the strength of this supposed assent, M'Gran could sustain an action of trover against the plaintiffs in error for the cotton, without paying the amount of their advances? But if the assent of the plaintiffs in error in the case at bar, was sufficient entirely to destroy their rights over the cotton in question, there is no reason why it should not do so in the case supposed.

2. But it is contended that the Court erred in instructing the jury that the measure of damages was the difference between the price for which the cotton was sold, and that which could have been obtained at any time from the day of sale to the period when the bill arrived at maturity.

The cotton was sold June 3d. On the same day the bill was accepted, and became due August 5th. But M'Gran had, as he alleges, by his letter of April 20th, forbidden the Messrs. Brown to sell, and his next letter, authorizing them to sell upon its being received, was not received until August 23d. If then the plaintiffs were bound by his instructions, they were not authorized to sell until August 23d; and the damage, if any, sustained by him, is for their not selling on or after that day. But there is no evidence in the case to show what was the price of cotton on or after that day, and therefore it does not appear that M'Gran has sustained any damage whatever.

The relation of principal and agent is governed by the general rules of the law founded on reason; and if the principal suffers through the remissness or negligence of the agent, the actual loss sustained by the principal in consequence of such misconduct, is the standard by which his damages must be measured. Hamilton et al. vs. Cunningham, 2 Brock. Rep. 366.

3. It is also contended, that the Court erred in instructing the jury, that if they found from the evidence in the cause, that cottons were selling for a higher price from the 3d June, 1833, when the draft was accepted, and when the cotton was sold, until the time when the draft was mature and payable, and if the evidence in the cause ascertains, at any time before the maturity of the draft, what such higher price was, and that the cotton belonging to the defendant in error could have been sold for such higher price, that then the defendant in error was entitled to recover from the plaintiffs in error the difference in price between the sum for which the plaintiffs in error sold the cotton of defendant in error, and the sum for which it might have been sold before or at the maturity of the draft, without making it necessary for them to find any other fact. This instruction is entirely independent of, and unconnected with, the preceding instructions of the Court. Upon finding simply the facts mentioned in it, the jury were told that they must bring in a verdict for the defendant in error, without reference to any of the other important facts proved in the case. This instruction was calculated to mislead the jury, and is therefore erroneous. Gist vs. Cockey, 7 Har. and John. 141.

Mr. Jones, for the defendant, denied that the acceptance of a draft, drawn by the owner or consignor against goods shipped to the factor, gives a right to the factor to sell the goods before the draft is payable. He cited, 6 Barn. and Cres. 36. 13 Com. Law Rep. 106. 1 Campbell's Rep. 410. 2 Starkie's Rep. 272. 2 Saunders' Plead. and Ev. 641.

He contended that the letter of the plaintiffs in error, of the 24th May, 1833, in answer to the letter of Thomas M'Gran, of the 20th of April, 1833, in which they say, 'your wishes in respect to the cotton we now hold on your account, are noted accordingly,' was a contract not to sell the cotton, until further instructions from the owner of the same. That it amounted to an unequivocal accession, in terms, to the order of the 20th of April, and to the clearest implication to abide by it.

Yet, on the 23d June, when the time had arrived when the duties on cotton were reduced, a period when the prices of cotton would increase, and before the effects of that, and other concurring causes of a rapidly increasing demand, and proportional advance of prices, could be fairly developed, they forced his cotton into market, in the teeth of his order, and of their unqualified accession to its terms only ten days before.

Cotton continued to advance in the Liverpool market after the sale; and at the time the plaintiffs in error were authorized by the subsequent letter of Thomas M'Gran to make sales, it had risen to a price which fully authorized the verdict of the jury.

But there was no occasion, nor was there any right to sell the cotton shipped by the defendant in error, for the purpose of reimbursement, until the acceptance of the bill drawn in New York should be matured. No advances in cash had been made by the house in New York, and nothing had been paid by the house in Liverpool. The whole accommodation afforded to the shipper of the cotton was mere paper facilities, by acceptances in New York; and when those acceptances became due, by a draft on Liverpool.

Mr. Jones considered that the proper test of the amount of the damages to which the defendant was entitled, was that which, under the instructions of the Circuit Court, had been adopted by the jury. The evidence showed the rise of the price of cotton, and as the plaintiffs in error were bound to keep it after their receipt of the letter of the 20th of April, the prices, until the draft was paid, should be considered as those to which the owner of the cotton was entitled.

He argued, 1. That as to the instructions rejected by the Court, they were, both in form and substance, in all their premises, and in all their conclusions, utterly inadmissible.

2. That the instructions actually given by the Court to the jury, so far from supplying any cause of complaint, were even more favourable to defendants than any they were strictly entitled to ask, and in all other respects unexceptionable.

Mr. Brown, in reply.

The argument of the learned counsel for the defendant in error proceeds upon the ground that the plaintiffs in error had a mere lien on the cotton in question, which could be waived by such an assent as is supposed to be implied by their letter of May 24th. But the authorities cited show that factors, under the circumstances existing in this case, have something more than a naked lien: they have a special property in the thing itself; a power of sale, coupled with an interest; and such a right cannot be waived, without at least an intention to do so being clearly and unequivocally expressed.

Mr. Justice STORY delivered the opinion of the Court.